Accounts Payable
Accounts payable refers to the money that you currently owe vendors or suppliers. In other words, your short-term, unpaid bills for which you’ve already been charged. You record on your balance sheet the amount that you haven’t paid yet to vendors and suppliers. Accounts payable is categorized as a liability because it’s technically debt. 📝
Accounts Receivable
Accounts receivable refers to the money that you haven’t received yet from your customers for either your product or service (think of unpaid invoices). In the traditional accounting process, you would credit your accounts receivable with the amount owed by the customer. Once the customer paid, you would debit the amount and move to your cash accounts. 💰
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